Morgan Stanley Case Study

Topics: Financial services, Morgan Stanley, John J. Mack Pages: 7 (2148 words) Published: October 2, 2008
The main focus of this essay is to present an analysis on Morgan Stanley’s business condition and troubles they were facing in the past and to provide solutions to solve their struggle. First, we will evaluate Morgan Stanley’s business by using the Porter’s 5 Competitive Forces Model. Then, we will illustrate the changes in the firm’s value chain before and after June 2005 by using the Value Chain Model. More than that, we will also analyze Morgan Stanley’s business by using the Management, Organization and Technology (MOT) factors. Lastly, we will include recommendations to solve their problems by using the MOT factors.

Morgan Stanley is a global financial services firm which was founded in 1935. The corporation operates in four different segments which include Institutional Securities, Asset Management, Retail Brokerage and Discover. The Discover division was founded in 1997 through the merger between Morgan Stanley and Dean Witter Discover and Co. This merger created bags of problem towards the company. Morgan Stanley’s staff did not accept the merger while Dean Witter’s employees felt disrespected by outsiders. The Retail Brokerage division did not integrate well with the other divisions. More than that, the company also faced difficulties because they did not invest enough technologically. In consequence, the company’s computer system was outdated and could not handle daily tasks efficiently, computers often crashed, printers clogged, and clients often complained about their website. In addition, the company’s competitors were already heavily investing in technology and this further complicates the situation. All of this occurred during the administration of Philip Purcell, the CEO at that time. In 2005, Purcell resigned and the board named John Mack as the new CEO of Morgan Stanley. Under the administration of John Mack, the company changed its directions and began to address the technology issue. John Mack also renamed the Retail Brokerage Division into Global Wealth Management Group as part of his vision to restore the corporation’s fame (Laudon & Laudon 2006).

The organisation can use competitive forces model as a tool to create a plan by examining the situation in which the organisation compete (Haag, Cummings & Dawkins 2000, p.324). There are five forces model which helps view the business of the company within an industry. These five main competitive forces include customer force, substitute force, new competition force, current competition force and supplier force. Curtis (1998, p.45) believes that the success of the business can be determined by looking at how the business react to these five forces.

Generally, customers can use their power to negotiate or threaten over the business whether to buy the product or service from the competitor (Curtis 1998, p.47). There are some factors which will affect the customers’ decision such as product standardised, number of sellers, role of quality and service, and so on (Wikipedia). According to the case, despite the merger between Morgan Stanley and Dean Witter, Retail Brokerage was poorly operated. The brokers had a disadvantage of not being able to do their job with an application which can provide them with both real-time stock quotes and transaction histories due to the poor outdated computer system. Poor quality and services provided by Morgan Stanley caused dissatisfaction within customers. This eventually led to the downfall of their business when customers decided to switch over to their competitors who offer better services. Normally, customers will be easily attracted to low prices. Hence, Morgan Stanley should play their part by keeping track of the pricing of its substitute. The existence of barriers makes it harder for new competitors to break into the financial service industry. There barriers include licensing agreement, exclusive access to natural resources, and more importantly the government’s rules and regulations (Sender 2008)....
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